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Tuesday, May 8, 2012

There really isn't much change from yesterday's predictions, however I do have a slightly "new" way of charting SPX which might be worth noting.

Yesterday, I warned that a larger fourth wave bounce might be in the cards, and it seems likely that we saw all (or part) of that fourth wave unfold through most of the session. Not a bad call considering that the futures were down 47,000 points when I published the article. In any case, it's tough to say if the entire fourth wave completed yesterday, since fourth waves are nasty and unpredictable environments, much like the inner depths of Bernanke's beard.

Based on the one-minute chart, I'm inclined to believe that at least one fractal did fully complete, suggesting the wave may be finished -- however, 4th waves are known to string several complete fractals together, so I can't be certain.

In either case, I don't believe the final lows for the larger wave are in yet. It would look much better with new lows, and I've outlined a progressive series of targets on the chart below.

The chart I really want to call attention to is the bigger picture SPX chart. It seems that just about every bear on the planet is watching the possible head and shoulders top which is forming in SPX. I want to point out that there are different ways to view it, though all of the charts I've seen are charting it with an upward-sloping neckline.

There's absolutely nothing wrong with charting it that way, but I always get nervous when too many technicians are on the same page, and begin to worry about foul-play from the market. The market doesn't like to be transparent, so the bulls might throw in a curveball.

Accordingly, I want to call attention to another way to chart the head and shoulders. The wave counts suggest that the way I'm charting it below may in fact be "correct." We'll have to pay close attention to what type of action develops around the potential necklines.

In either case, aggressive bears won't necessarily want to wait and see if my hypothetical is correct. But it's certainly worth being aware of the potential.

Next up is COMPQ, which appears to be in a similar position to SPX, and looks like it needs to make new lows before any significant rally can get started.

I also wanted to update CVX, whose chart just seems to get uglier everyday. I'm looking for new lows here as well, followed by a larger bounce, followed by me (and some of my readers, no doubt) shorting the living daylights out of it, followed by all of us living out our days explaining to our in-laws that, no, they can't have any more "small loans." At least, not until they pay the last one back.

And finally, I want to call attention to the DAX, which did something noteworthy yesterday: it overlapped the red wave-a high, thereby joining the FTSE in ruling out the super-bullish long-term counts (which I ruled out a long time ago) with very high probability. It also appears to be in a similar position to SPX and COMPQ -- so the stars seem to be aligning for the bears over the intermediate term.

In conclusion, the expectation is that there may or may not be a little more sideways yuck left in the market first -- my inclination is that there's not -- but either way, new lows appear highly probable. There are short-term targets listed on each chart, and I expect a decent bounce will emerge from one of the targets listed. We'll keep tracking the short-term structure as it unfolds. Trade safe.

355 comments:

Morning PL - not exactly making money yet but hopefully will be in a position to donate from some profits soon (just trying to reverse losses to date). I think of it as paying for an education - will pay the educator as soon as I can :)!

Good Morning PL...EXCELLENT article (just wanted to make sure you could see EXCELLENT). Bears are feeling good today I think. It was a great balance of info and humor....PLEASE WRITE AN EW BOOK!!!...F&P is frying my synapses. I read it in bed before I go to sleep every night, cuz it's so dry it relieves my sinus problems, plus it knocks me out like Propofol on Michael Jackson (...is it too soon?). Ya wouldn't sell a million of'em but it would save so many brain cells and possibly humanity...think of the chilluns.

I'm seeing a potential inverted hs pattern from yesterday formed , which gives me a target in the 1380-1390 area ,, I believe that we will kiss daily MA50 goodbye at around 1385-1386 ,, then another move down.

Brilliant observation re: SPX60 (2d chart) on H&S whipsaw. Remember July 2009 when all of MSM and widows/orphans were salivating over a H&S top? Not quite the same here, but there will be heads on a platter short term.

The thing is Pretzel ,, if more selling first , then we are going to break below a KEY neckline in a topping head and shoulders pattern , which will target 1290-1300 near term. So a move to 1340 is possible before a bounce then... as we have a key trendline (neckline) support at 1364-1365

Could it be they are thinking b/c we are in w5 down and it could be nearing a possible end? I was looking at some longer term charts (decade) and they are just starting to turn down on the Stochastics, for example.

Katzo7, You did it again!!! Most of my trades are done with my own work. Today, I continued to use my own strategy but you helped reinforce my convication on my trade. I will be donating to Mr. PL today because of you, PL, and PL's great community here.

COMP on the Ichi Moku charts has bust straight thru' the Cloud and out the other side. This is baaaaaaad news for the bulls, that is if there are any left on here... Bob_E I hope you went short on MMM, down >3% in a few days, good call, plunged into the Cloud and almost out the other side... strong markets these. Strong bounce maybe?

what this action does is to move us one step closer to the EW3 on the day being formed. We are moving into a strong EW3 down on longer term charts (not the day yet), and each day is a step closer to a pivotal change (no going back).

I think moves like the one we are seeing today tend to prevail until the end of the session. The magnitude and breadth give an indication that we will be closing at the low of the day. Maybe a rebound will be short lived!!!

Interesting point, isn't it? PL was talking about the H&S, and a bounce up at the neckline from wave counting. But from H&S perspective, we're talking about the height of the head, vectored downward, once the H&S completes. -DD

No clue what this means or how the market would be expected to respond. Does a "cloud break" usually lead a crash? Is there a backtest? How does all this Itchy Moku stuff work, beyond the commercials I see advertising the creams to treat it?

Just remember the market always looks darkest just before the bounce. I've watched way too many stick saves through the years to get overly bearish just yet. If the bears can take 1340 convincingly, that'll be another matter. Until then, I've got my jiu-jitzu bear protective gear on...

So it looks to me like we've got a decisive breakdown through your red trendline, your green trendline, my 2011 high line, the bottom of the mid-April trading range and a complete entrancement of the now failed upside breakout of same... I'd still like to see a notarized letter from Ben Bernanke's beard.

Looks like from here we'd like to see a failed backtest of one or more of those previous support levels then it's all aboard the crazy train?

"Yesterday was what I expected, a struggle to move higher with a sell off EOD. Today we should see some movement, getting past the previous support points (50, 42.5) will be tough but 1336-7 ES is possible at some future point as we slip into the EW5 (60) down. Last nite ~ this should do some dropping from 4:30 {pm when ES opens] on, nothing major but if I am seeing this correctly, some steady selling. . . this will be the back end of the day pattern I recognized"

This is a test right here. Got a 3-wave rally so far on SPX. If the bulls can break any more upside there (above 1353), expect a bigger bounce to unfold. Could be sharp, too. If they can't, then the down move continues.

Everybody be sure and go read the article all over again at Minyanville. It's actually a mish-mash of yesterday's and today's article. You don't actually need to re-read it -- just click the link and visit it, please. :)

Hi PL. You're welcome for the donation. I'm recovering from some bone-headed moves but still learning alot from your site. Had to get out for awhile due to the losing trade count and also to help a family member recover from surgery. Thank you for all your hard work negotiating with MV.

Snowbeast, just wanted to echo everyone else and wish your father a complete recovery ASAP. I will say a prayer for you. I'm sure HE will know who it's about. :)

For all you RUTrs out there, it looks to be hanging on to the trendline PL pointed out yesterday for dear life. I've been cash only for awhile now lickin' my wounds so to speak. If it breaks the trendline, I may just jump back in. Good luck to all. This is quite an exciting day!

I'm done for the day. I wouldn't even risk play money on this nonsense. I was just watching ES though and thinking it might be wanting to replay Sunday night for the primetime viewing audience. 1352 could be the trigger level again to get the bulls a-snortin'.

PL - it would be to your advantage if all the comments here -- appeared at the MV location. With blogs, often it's the comments that engage viewers, not to mention the excellent user-provided content from geniuses such as myself. That's my hot tip of the day - and CAT too!

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